Egypt’s new capital project to involve Chinese

Friday 09/10/2015
A model of a planned new capital for Egypt is displayed for investors at the opening of the Egypt Economic Development Conference (EEDC) in Sharm el-Sheikh, about 550 kilometres south of Cairo, on March 13, 2015.

Cairo - Plans by the Egyptian gov­ernment to establish a new capital, the size of Singapore and seven times larger than Paris, are in doubt after an agreement with a Gulf real estate developer went awry. This is allowing other inter­national construction companies, including one from China, to step in.
The Egyptian government an­nounced in March that a UAE de­veloper would be responsible for constructing the capital, which is expected to fill desert space be­tween Cairo and the Red Sea prov­ince of Suez, stretching to the Suez Canal and the eastern province of Ismailia.
Referred to as “The Capital” or the “New Administrative Capital”, the project covers 700 square kilo­metres and is expected to house 5 million people. Egyptian ministry headquarters and foreign embas­sies would be moved from Cairo to the new city.
This enterprise, however, seemed to have suffered a setback after reports that the UAE devel­oper would pull out due to finance-related disagreements with the government.
The government said the UAE developer would be responsible for part of the project only, amid re­ports about negotiations between Cairo and a major Chinese con­struction company to take over the project.
Egyptian Investment Minister Ashraf Salman signed a memo­randum of understanding on Sep­tember 2nd with China State Con­struction Engineering Corporation, ranked the third largest general contractor in the world, to take over part of the project. The work of the company in the new administrative capital will be financed by Chinese banks in the light of the memo.
“A huge project like this one should not be left in the hands of one company only or we will be running a great risk,” architect Mo­hamed al-Bostani told The Arab Weekly. “The government should look for local partners to imple­ment such a project.”
When it announced plans to con­struct the new capital, the govern­ment said the project would be financed by the UAE firm and that the money would not come from local banks.
The project was good news for Cairo residents. Demographic stud­ies suggest that about 40 million people will be living in Cairo in the year 2050, up from 18 million at present.
When it was first envisioned, the new capital was strongly linked to Egyptian plans for the Suez Canal. Egypt created a parallel channel to the canal, allowing two-way tran­sits for the first time since it opened in 1869.
Egypt plans to turn the banks of the canal into the Middle East re­gion’s largest industrial and service hub, hoping to attract hundreds of billions of dollars in investments and create hundreds of thousands of jobs.
The new capital should be pe­destrian-friendly, containing more than 10,000 kilometres of boule­vards, avenues and streets, accord­ing to media reports. It is also to have a vibrant recreational space to bring people together.
It is expected to consist of about 40 residential districts. Its centre is expected to be made of skyscrapers and a tall monument said to resem­ble the Eiffel Tower and the Wash­ington Monument.
The city will also have a park dou­ble the size of New York’s Central Park, artificial lakes, about 2,000 educational institutions, a tech­nology and innovation park, 663 hospitals and clinics, 40,000 hotel rooms, a theme park four times the size of Disneyland, 90 square kilo­metres of solar energy farms, an electric railway link with Cairo and an international airport.
All these plans are uncertain as the government seeks a major de­veloper to implement the project.
On September 9th, Housing Min­ister Mustafa Madbouly told a local newspaper that the government may build the project itself in coop­eration with the private sector.
Given Egypt’s current economic hardship and lack of cash, this idea seems unfeasible, experts say.
“My suggestion is that the gov­ernment opens the project for public subscription,” construction planning expert Abdel Khaliq al- Taweel said. “This can put an end to funding problems.”
Egypt carried out a successful subscription process when it start­ed the Suez Canal parallel channel. The project cost $8 billion, money that was not in government coffers at the time. To finance the project, the government allowed the public to subscribe in return for invest­ment certificates with a 12% inter­est rate. The money was collected in less than ten days.
However, the administrative cap­ital project seems to be too large to implement in a similar fashion. The project is expected to cost $45 bil­lion with an additional $2.2 billion for infrastructure.
Madbouly said the government had allocated $600 million for in­frastructure, noting that compa­nies affiliated with the Egyptian Army had started developing the infrastructure of the project.
Nevertheless, Taweel and like-minded experts said the absence of serious national developers with the necessary financial capacity will make the project mere ink on paper.
“Instead of searching abroad for a developer, the government should look inside Egypt,” Taweel said. “We have major construction companies here that have a won­derful track record.”